Genworth Financial (GNW) Stock Falls After Price Target Decrease

NEW YORK (TheStreet) -- Shares of Genworth Financial (GNW) were falling 5.2% to $8.71 Tuesday after JPMorgan Chase lowered its price target for the life insurance provider to $11 from $18.

"We feel that Genworth's reserve hole is significantly larger than the upcoming charge," analyst Jimmy Bhullar wrote. "Given the company's limited disclosure on its in-force block, as well as significant management discretion in setting assumptions for reserve analysis, we consider projecting the charge with precision an exercise in futility."

The analyst said that Genworth may record costs of $200 million to $300 million in the fourth quarter, and that its total shortfall may be more than $2 billion.

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TheStreet Ratings team rates GENWORTH FINANCIAL INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate GENWORTH FINANCIAL INC (GNW) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, good cash flow from operations and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and a generally disappointing performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • GNW's revenue growth trails the industry average of 22.0%. Since the same quarter one year prior, revenues slightly increased by 3.8%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to $562.00 million or 19.32% when compared to the same quarter last year. Despite an increase in cash flow, GENWORTH FINANCIAL INC's cash flow growth rate is still lower than the industry average growth rate of 33.69%.
  • Despite currently having a low debt-to-equity ratio of 0.45, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Insurance industry. The net income has significantly decreased by 881.5% when compared to the same quarter one year ago, falling from $108.00 million to -$844.00 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Insurance industry and the overall market, GENWORTH FINANCIAL INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: GNW Ratings Report

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